American Airlines is working hard to recover its indirect sales revenue after a failed attempt to shift bookings to its direct channels. The airline’s CEO, Robert Isom, acknowledged the setback during the company’s Q4 2024 earnings call on January 23, 2025, stating that the airline has renegotiated contracts with corporate clients and travel agencies to restore its market share in indirect sales.
Despite the temporary revenue loss, Isom remains confident that American Airlines will fully recover by the end of 2025. The airline has made significant progress in rebuilding relationships with corporate clients, travel agencies, and distribution partners, ensuring a strong foundation for future growth.
What Went Wrong? The Failed Direct Booking Strategy
The Shift to New Distribution Capability (NDC)
In October 2022, American Airlines signed agreements with Amadeus, Sabre, and Travelport to promote direct sales through the New Distribution Capability (NDC). This meant encouraging customers and businesses to book directly through the airline rather than using third-party travel agencies and corporate travel managers.
However, this move backfired, leading to:
❌ Loss of key corporate clients who relied on third-party booking systems
❌ Declining indirect sales revenue as businesses struggled to book flights conveniently
❌ Damaged relationships with travel agencies that previously helped drive ticket sales
The Consequences: Leadership Changes & Financial Impact
- June 2024: Vasu Raja, former Chief Commercial Officer (CCO), resigned following the failure of the direct booking strategy.
- Q4 2024 revenue: $13.7 billion, a record for American Airlines but net income ($846 million) lagged behind competitors like Delta and United.
Seeing the financial and reputational damage, American Airlines reversed its strategy and began renegotiating agreements with corporate clients and travel distributors.
American Airlines’ Recovery Plan for Indirect Sales
1. Rebuilding Relationships with Corporate Clients
American Airlines has modified contract terms with its most important corporate customers to bring them back into the fold.
- Isom admitted that hub markets suffered the most during the failed strategy, but efforts have been made to restore those lost customers.
- Negotiations have been tough, with some partners expressing strong frustration over past decisions.
- Steve Johnson, Chief Strategy Officer (CSO), referred to this process as the “apology tour,” acknowledging the damage done.
2. New Agreements with Travel Agencies
- The airline has re-signed contracts with major agency partners, ensuring that travel agencies can once again sell American Airlines tickets.
- Leisure travel agencies, which play a crucial role in high-margin leisure bookings, have also renewed agreements with American.
3. Gradual Revenue Recovery Throughout 2025
- The impact of these new agreements won’t be immediate since contracts take time to generate revenue.
- Isom emphasized that the company is learning from past mistakes and will remain flexible in future strategies.
Is American Airlines on Track for Full Recovery?
During the earnings call, analysts asked whether American Airlines could fully recover the revenue lost from indirect channels.
Key Takeaways from the Executive Team:
📈 Robert Isom (CEO): Confident in full recovery by the end of 2025 and believes the airline can outperform past financial results.
📊 Steve Johnson (CSO): Stated that negotiations have been difficult but agreements with key travel managers and agencies are now in place.
💰 Future Revenue Outlook: American Airlines expects strong forward bookings in Q1 2025, driven by the renewed focus on indirect sales.
Financial Performance: How American Airlines Compares to Rivals
Q4 2024 Results
- Revenue: $13.7 billion (record high)
- Annual Revenue: $54.2 billion (record high)
- Net Income: $846 million (lower than Delta and United Airlines)
While American Airlines achieved strong revenue, its profitability lags behind competitors, partly due to the fallout from the direct booking strategy.
Steve Johnson (CSO) hinted that while American Airlines is on the right track, it will take time to fully restore lost sales.
What’s Next for American Airlines?
1️⃣ Strengthening Indirect Sales Channels: The airline will continue building strong partnerships with corporate customers and travel agencies.
2️⃣ Monitoring Revenue Growth: The impact of the new agreements will start showing in late 2025, with a full recovery expected by year-end.
3️⃣ Avoiding Past Mistakes: American Airlines acknowledges the failure of its direct booking push and aims to be more flexible in future strategies.
A Tough Lesson Learned, But Recovery is Underway
American Airlines’ attempt to shift bookings to direct channels proved to be a costly mistake, but the airline is now on the path to recovery.
With new agreements in place and a renewed focus on indirect sales, the airline is optimistic about regaining lost revenue by the end of 2025. However, it remains to be seen whether American Airlines can match the financial success of Delta and United in the long term.
Will this strategy shift be enough for American Airlines to regain its position in the market? Only time will tell.
